Exercise: Compare National Economic Performance as Reflected in Income Distribution

As author Daniel Yergin points out in the film (Episode Three: Chapter 18: The Global Divide), no economic system can survive for long without the confidence of the people who participate in it. Confidence in an economic system is shared among those who reap a benefit from it. The more widely distributed the economic benefit, the greater the legitimacy of the system and the stronger it stands. The distribution of benefits thus has political as well as material ramifications.

Economists track distribution within an economy by dividing the population into groups of equal size, and looking at the share of total income each group receives. In a totally egalitarian society, each same-sized group would earn an equal share of total income. But in the real world, that's not what happens.

Examining Distribution of Income

The charts below show income distribution in seven nations. (Data: Deininger and Squire, 1996. Tanzania's figures are for 1993; all the rest are 1989.)

Each chart presents five colored bars. Each bar represents 20% of the nation's population, grouped in rank order by income. The height of each bar indicates the proportion of the nation's total income received by that group.

The horizontal dotted line shows how tall each bar would be if income were distributed exactly equally. In a society where income was evenly distributed, each 20% of the population would receive exactly 20% of the society's total income.

Try this:

Which country appears to have the most egalitarian distribution of income?

Which country appears to have the most lopsided distirbution of income?

What forces or factors might plausibly contribute to a lopsided distribution ofincome within a national economy?

Is an even distribution of income the same thing as a fair distribution of income? Why or why not?